EU LEADERS may convene an extraordinary summit early in March to sign off on reforms to the euro zone bailout fund after initial talks at a scheduled summit on Friday, according to a well-placed European official.
As the 27 heads of state and government prepare to discuss debt buybacks for bailout recipients over lunch on Friday and lower interest on rescue loans, investor sentiment will be tested tomorrow when Portugal returns to the debt market and a day later when Spain raises money.
The summit will in all likelihood be the last attended by Taoiseach Brian Cowen, so it will fall to his successor to continue the negotiation. Any deal on interest rates or debt buybacks could have a big bearing on Ireland’s fortunes.
There had been expectation that the leaders would push for a final deal at a scheduled summit on March 24th and 25th, so any move to convene an extraordinary summit earlier would give less time for the incoming taoiseach to seek more favourable terms.
The possibility of extending the maturity on rescue loans to as long as 30 years has also emerged, but sources said that was one of many possibilities, not the prime focus.
Some of the pressure on the euro zone dissipated in recent weeks. Against this backdrop, Portugal plans this week to issue between €1 billion and €1.25 billion in six- and 12-month bonds and Spain plans to issue between €3 billion and €4 billion in three- and five-year money.
Also under discussion is a form of debt restructuring in which countries in rescue programmes would receive loans to buy some of their own debt at a discount. Such a scheme would be voluntarily and it could set a precedent for Ireland to retire some of its debt.
Analysts are sceptical.
Citigroup said: “Such an action may not be so effective in reaching its final aim – restoring confidence in the Greek sovereign borrower.”
The bank said a buyback could reduce Greece’s debt-to-GDP ratio from 140 per cent to 115 per cent. It doubted this new ratio “would assure investors of the long-term sustainability of Greek public finances”.
